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Edited version of private advice
Authorisation Number: 1052182119179
Date of advice: 19 October 2023
Ruling
Subject: CGT - small business concession
Question 1
Does the Property satisfy the active asset test in relation to the Company for the purpose of the small business CGT concessions under section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The partnership, an entity connected to the Company, used the Property in carrying on its business. Considering the nature of the Property, the nature of the business conducted by the partnership, and the Property's use in this business, we consider the Property to have been an active asset of the Company throughout its ownership period. As the business use by the partnership was for a period of more than 7.5 years the Property satisfies the active asset test under section 152-35 of the ITAA 1997 at the time of its sale.
Question 2
Will any capital gain arising from the disposal of the shares held by Person A in the company happen in connection with their retirement?
Answer
Yes. Having considered the circumstances we consider that the sale of the shares will be in connection with Person A's retirement given they will cease working in the business once the shares are sold.
Question 3
Will any capital gain arising for the company from the disposal of the Property happen in connection with Person A's retirement?
Answer
Yes. Having considered the circumstances we consider that Person A will be a significant individual in the Company and the sale of the property will be in connection with their retirement given they will cease working in the business once the Property is sold.
This ruling applies for the following periods:
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commenced on:
1 July 2023
Relevant facts and circumstances
Person A is over 55 years of age and is an Australian resident for tax purposes.
At the time of incorporation of the company, Person A held all the shares.
The Company is an Australian resident for tax purposes.
Over 15 years ago, the Company acquired a majority ownership interest in the Property
The Property was purchased to operate a business.
Soon after the Property was acquired, the Company entered into a partnership to carry on a business of primary production.
The Company has a majority interest in the partnership.
The partnership has always used the Property to carry on the business and the partnership continues to operate the business to date.
The partnership made a profit in four of the last five years.
The partnership pays all operating costs of the Property, including council and water rates. The Company does not charge rent to the partnership for its use of the Property.
Person A is employed by the business and once the Property or shares are sold they will permanently retire.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 152-10
Income Tax Assessment Act 1997 section 152-35
Income Tax Assessment Act 1997 section 152-40
Income Tax Assessment Act 1997 section 152-55
Income Tax Assessment Act 1997 section 152-65
Income Tax Assessment Act 1997 section 152-105
Income Tax Assessment Act 1997 section 152-110
Income Tax Assessment Act 1997 section 328-125